Judge Gives eBay Sellers Chance to Amend PayPal Antitrust Complaint

eBay sellers who filed a class-action antitrust lawsuit against the company last year have until January 27th to file a second amended complaint, a judge ruled on Thursday. eBay had filed a motion to dismiss, which the judge granted in part and denied in part. According to the lawsuit allegations, "While eBay lists purported alternative payment methods, eBay has through its intentional action made it so PayPal is the only viable option for sellers." The plaintiffs also complained about eBay's policy of collecting commission fees on shipping costs.

The plaintiff, eBay seller Charlotte Smith, filed the lawsuit against eBay on April 12, 2010, over the company's policy that forces sellers to use its PayPal online payment service.

Smith's complaint alleges that eBay sellers "effectively have and will continue to have no choice but to accept payment using only eBay owned PayPal, and as a result sellers are and will continue to be required to pay eBay through PayPal an additional fee up to 3% and .30USD per transaction. Defendant's actions constitute an unlawful tying arrangement resulting in an impermissible restraint of trade, in violation of federal law."

eBay had moved to dismiss the plaintiffs' claims because, under the Clayton Act, private antitrust claims are subject to a four-year statute of limitations, and the plaintiffs had claimed that eBay's 2002 acquisition of PayPal "eliminated competition and expanded (eBay's) own market dominance," such that eBay "possesses effective monopoly power in online auction markets."

But Smith's lawsuit referred to several developments in eBay's history that increasingly limited sellers ability to accept other forms of payment, including its ban on Google Checkout, cash, and money orders.

In his ruling last week, the judge referred to another case involving Rite Aid retail merchants and American Express: "much like the plaintiffs in the Rite Aid case, Plaintiffs here premise their tying claims on eBay's continued modification of the Accepted Payment Policy. As in the Rite Aid case, the Court concludes that those changes do constitute overt acts, and it finds that Plaintiffs have alleged sufficient facts to show that those changes inflicted new and accumulating harm on them. In addition, Plaintiffs have alleged that eBay had the ability to and did enforce the purported tying arrangement within the limitations period."

The judge, however, agreed with eBay that the plaintiffs failed (1) to allege facts to show that a tying arrangement exists; (2) to allege facts that show an actual adverse effect on competition; (3) to allege facts supporting the relevant markets; and (4) to allege facts showing antitrust injury." Although the Court agrees that Plaintiffs have failed to allege facts showing an adverse effect on competition, it shall address each of Defendants arguments."

For example, the judge writes, "the Court concludes that Plaintiffs have failed to allege facts showing that the alleged tie caused harm to competitors in the tied product market. Because Plaintiffs may be able to allege such facts, the Court shall grant them one final opportunity to amend."

eBay Charges Fees on Shipping Costs
Plaintiffs also wanted relief from eBay's practice charging "improper collection of shipping fees as part of final value fee," a policy that infuriates many eBay sellers. The judge said, however, that plaintiffs had not allged that they they did not consent to pay eBay a final value fee. "Although leave to amend should be freely granted, in light of the facts of this case, the Court concludes that Plaintiffs would not be able to state a claim for conversion."

The Smith v eBay lawsuit is not the only case in which sellers have claimed eBay violated antitrust laws, and in November, plaintiffs in one class-action lawsuit against PayPal (Fernando vs. PayPal) asked a judge to intervene in a related lawsuit (Zepeda vs. PayPal) on the grounds that they involved essentially the same charges, and that any rights accorded to one class would be available to the other.

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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